Correlation Between KFA Mount and First Trust

Can any of the company-specific risk be diversified away by investing in both KFA Mount and First Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KFA Mount and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KFA Mount Lucas and First Trust Managed, you can compare the effects of market volatilities on KFA Mount and First Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KFA Mount with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of KFA Mount and First Trust.

Diversification Opportunities for KFA Mount and First Trust

-0.14

Correlation Coefficient

KFA Mount  First Trust

Good diversification

The 3 months correlation between KFA and First is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding KFA Mount Lucas and First Trust Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Managed and KFA Mount is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KFA Mount Lucas are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Managed has no effect on the direction of KFA Mount i.e., KFA Mount and First Trust go up and down completely randomly.

Pair Corralation between KFA Mount and First Trust

Given the investment horizon of 90 days KFA Mount Lucas is expected to under-perform the First Trust. In addition to that, KFA Mount is 1.42 times more volatile than First Trust Managed. It trades about -0.03 of its total potential returns per unit of risk. First Trust Managed is currently generating about 0.04 per unit of volatility. If you would invest  4,526  in First Trust Managed on September 12, 2024 and sell it today you would earn a total of  411.00  from holding First Trust Managed or generate 9.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KFA Mount Lucas  vs.  First Trust Managed

KFA Mount Lucas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KFA Mount Lucas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

First Trust Managed

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KFA Mount and First Trust

The main advantage of trading using opposite KFA Mount and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KFA Mount position performs unexpectedly, First Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Trust will offset losses from the drop in First Trust's long position.

The idea behind KFA Mount Lucas and First Trust Managed pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.